Market Update

Patience is one of the hardest lessons to learn in the market, whether entering too early, cutting a winning position too fast, getting caught up in day to day or intraday trade when you have a significant reason to put consideration toward the larger picture and larger trades. Even the last 7 or so days which has been almost 2 trading weeks (holiday and half day) has seen the market barely move, in most cases one tenth of 1 percent either up or down, not the kind of market you want to rush in to, but we often feel the need to try to make something happen or to gain back losses quickly rather than patiently. 

It has been hard for me not to call out trades , but considering the past two weeks or so, I think it was the wise thing to do, sometimes keeping your chips is a victory in itself.

In any case, since Friday's warnings of last week which were very noticeable, Important Intraday Update and right after that, CHANGES IN CHARACTER LEAD TO CHANGES IN TRENDS , it is obvious that on what I expected to be a boring half day of trade, we had some very strong signals that carried over and wreaked havoc on Sunday night's opening futures trade as well as the first hour of trade Monday creating a short term flameout via a strong downward parabolic move on large volume, this was a short term capitulation or selling climax which is why by 10:30 a.m. we were already expecting a corrective bounce which we've seen this week with the IWM mostly leading as predicted and QQQ lagging as also predicted.

Even though today is a weekly op-exday and it appeared evident in overnight trade at least until Europe opened and also appears evident in some intraday charts from the last hour yesterday, all look like they were put in place to create today's options expiration max-pain pin, WE ARE SEEING SIMILAR DETERIORATION LIKE LAST WEDNESDAY AND MORE SPECIFICALLY FRIDAY.

I'm trying to keep patient until I have what I''d consider the highest probability signals and it's a bit tough as the market continues to move in that direction among a larger picture that is without precedent (bearish-HY Credit, rates, leading indicators, breadth, etc).

Thus far here's what the averages are looking like as you have already seen the Index futures (the quickest way for me to update)... Remember that the op-ex max-pain pin usually lasts until 2:00-3 p.m. and then the market will do as it wants, however the 3C signals like last Friday during the last hour are some of the best data of the entire week and Monday typically picks up where Friday's 3C signals left off despite or in line with whatever price did the last hour or two of Friday.

My point in the 5 min ES chart is not the deterioration, which is what happened Friday and in to Sunday as futures opened as posted Sunday, Sunday Night Index Futures, it's simply to show a positive divegrence yesterday at the lows which appears to have set up an op-ex max pain pin, often opening right at Thursday's close and staying close to the range. Note the VERY flat ES trade overnight, I was surprised by how flat it was and suspected it was to keep ES around the max-pain op-ex pin.

 

 SPY intraday, note the 1 min positive at the afternoon lows. It was suspected this was to keep the SPX green on the week as it otherwise would not have been, but it may have also been to set up the op-ex max pain level for today's open which was near the close.

Also the noticeable intraday SPY divegrence to the far right which is growing. This week's trade on Tuesday, Wednesday and Thursday for the most part was nothing more than corrective from Monday's very ugly open, causing a selling climax in the first hour, beyond that it has done virtually nothing although the IWM did have good leadership, it did not come close to regaining last Wednesday/Friday's range (highs).

 SPY 5 min with the very negative tone I mentioned in Friday's last several posts, this during the week of Black Friday where sentiment needed to be protected as Consumer sentiment was already on the rocks. The average person doesn't understand PMI's and even GDP, what they understand is the drive home from work and the news broadcast that the "DOw lost 120 points today", that's their barometer of the economy , that's what they can understand and that's what needed to be protected against the week of Black Friday, however as you can see, there was very negative action building that erupted in Sunday night futures and Monday morning.

Since, the 3C chart HAS NOT improved at all.

 I don't think I need to mark today's IWM divegrence, this is also part of the reason I mentioned the IWM and QQQ earlier this morning.

IWM 2 min migration

 IWM 3 min migration, also note the pinching ascending wedge intraday that is seeing price break below it now.

 Like last week's 5 min IWM chart/warning, this week's is shaping up to look very similar, as you can see, it didn't turn out well Monday morning.

 I mentioned the Q's earlier as well, they have not acted well all week which is what we expected since they had little to no bounce divegrence unlike the IWM which had the largest. This is the performance on the week, note the significant change of character today intraday to the far right.

The same put in more proper context including last Wednesday/Friday with a head fake move seeing significant distribution in to it.

AND YET MORE SIGNIFICANT CONTEXT...

Note 3C in line, although negative from the 24th through the 28th-Black Friday week, and the head fake moves distribution, not only on a relative divergence, but note the leading negative in the red box before price has even turned down.

It doesn't look any better since this week's oversold correction.

THESE ARE BUT A FEW REASONS I WATCH THE IWM/QQQ AND OTHERS SO CLOSELY TODAY.